PFF vs. IWS: What’s The Difference?

The iShares Preferred and Income Securities ETF (PFF) and the iShares Russell Mid-Cap Value ETF (IWS) are both among the Top 100 ETFs. PFF is a iShares Preferred Stock fund and IWS is a iShares Mid-Cap Value fund. So, what’s the difference between PFF and IWS? And which fund is better?

The expense ratio of PFF is 0.23 percentage points higher than IWS’s (0.46% vs. 0.23%). PFF also has a higher exposure to the utilities sector and a lower standard deviation. Overall, PFF has provided lower returns than IWS over the past 11 years.

In this article, we’ll compare PFF vs. IWS. We’ll look at performance and holdings, as well as at their portfolio growth and fund composition. Moreover, I’ll also discuss PFF’s and IWS’s annual returns, industry exposure, and risk metrics and examine how these affect their overall returns.

Summary

PFF IWS
Name iShares Preferred and Income Securities ETF iShares Russell Mid-Cap Value ETF
Category Preferred Stock Mid-Cap Value
Issuer iShares iShares
AUM 19.8B 14.24B
Avg. Return 6.90% 12.35%
Div. Yield 4.47% 1.34%
Expense Ratio 0.46% 0.23%

The iShares Preferred and Income Securities ETF (PFF) is a Preferred Stock fund that is issued by iShares. It currently has 19.8B total assets under management and has yielded an average annual return of 6.90% over the past 10 years. The fund has a dividend yield of 4.47% with an expense ratio of 0.46%.

The iShares Russell Mid-Cap Value ETF (IWS) is a Mid-Cap Value fund that is issued by iShares. It currently has 14.24B total assets under management and has yielded an average annual return of 12.35% over the past 10 years. The fund has a dividend yield of 1.34% with an expense ratio of 0.23%.

PFF’s dividend yield is 3.13% higher than that of IWS (4.47% vs. 1.34%). Also, PFF yielded on average 5.45% less per year over the past decade (6.90% vs. 12.35%). The expense ratio of PFF is 0.23 percentage points higher than IWS’s (0.46% vs. 0.23%).

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Fund Composition

Industry Exposure

PFF vs. IWS - Industry Exposure

PFF IWS
Technology 0.0% 11.39%
Industrials 10.27% 14.6%
Energy 0.0% 4.71%
Communication Services 0.0% 4.08%
Utilities 81.81% 6.97%
Healthcare 3.54% 8.56%
Consumer Defensive 0.0% 4.76%
Real Estate 0.65% 11.71%
Financial Services 0.0% 15.75%
Consumer Cyclical 0.0% 12.07%
Basic Materials 3.74% 5.4%

The iShares Preferred and Income Securities ETF (PFF) has the most exposure to the Utilities sector at 81.81%. This is followed by Industrials and Basic Materials at 10.27% and 3.74% respectively. Financial Services (0.0%), Consumer Defensive (0.0%), and Communication Services (0.0%) only make up 0.00% of the fund’s total assets.

PFF’s mid-section with moderate exposure is comprised of Energy, Technology, Real Estate, Healthcare, and Basic Materials stocks at 0.0%, 0.0%, 0.65%, 3.54%, and 3.74%.

The iShares Russell Mid-Cap Value ETF (IWS) has the most exposure to the Financial Services sector at 15.75%. This is followed by Industrials and Consumer Cyclical at 14.6% and 12.07% respectively. Energy (4.71%), Consumer Defensive (4.76%), and Basic Materials (5.4%) only make up 14.87% of the fund’s total assets.

IWS’s mid-section with moderate exposure is comprised of Utilities, Healthcare, Technology, Real Estate, and Consumer Cyclical stocks at 6.97%, 8.56%, 11.39%, 11.71%, and 12.07%.

PFF is 74.84% more exposed to the Utilities sector than IWS (81.81% vs 6.97%). PFF’s exposure to Industrials and Basic Materials stocks is 4.33% lower and 1.66% lower respectively (10.27% vs. 14.6% and 3.74% vs. 5.4%). In total, Financial Services, Consumer Defensive, and Communication Services also make up 24.59% less of the fund’s holdings compared to IWS (0.00% vs. 24.59%).

Holdings

PFF - Holdings

PFF Holdings Weight
Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A 2.54%
BlackRock Cash Funds Treasury SL Agency 2.3%
Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L- 1.79%
Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L- 1.49%
ArcelorMittal S.A. 5.5% 1.36%
Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A 1.35%
Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B 1.14%
NextEra Energy Inc Unit 1.12%
Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4 1.08%
Avantor Inc Ser A 0.99%

PFF’s Top Holdings are Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A, BlackRock Cash Funds Treasury SL Agency, Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L-, Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L-, and ArcelorMittal S.A. 5.5% at 2.54%, 2.3%, 1.79%, 1.49%, and 1.36%.

Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A (1.35%), Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B (1.14%), and NextEra Energy Inc Unit (1.12%) have a slightly smaller but still significant weight. Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4 and Avantor Inc Ser A are also represented in the PFF’s holdings at 1.08% and 0.99%.

IWS - Holdings

IWS Holdings Weight
Twitter Inc 0.69%
Marvell Technology Inc 0.69%
IHS Markit Ltd 0.62%
Prudential Financial Inc 0.56%
Otis Worldwide Corp Ordinary Shares 0.54%
International Flavors & Fragrances Inc 0.53%
Xcel Energy Inc 0.52%
Motorola Solutions Inc 0.52%
Aptiv PLC 0.52%
Aflac Inc 0.52%

IWS’s Top Holdings are Twitter Inc, Marvell Technology Inc, IHS Markit Ltd, Prudential Financial Inc, and Otis Worldwide Corp Ordinary Shares at 0.69%, 0.69%, 0.62%, 0.56%, and 0.54%.

International Flavors & Fragrances Inc (0.53%), Xcel Energy Inc (0.52%), and Motorola Solutions Inc (0.52%) have a slightly smaller but still significant weight. Aptiv PLC and Aflac Inc are also represented in the IWS’s holdings at 0.52% and 0.52%.

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Risk Analysis

PFF IWS
Mean Return 0.52 1.06
R-squared 9.39 87.04
Std. Deviation 7.87 16.03
Alpha 3.45 -4.11
Beta 0.81 1.1
Sharpe Ratio 0.72 0.75
Treynor Ratio 6.79 10.3

The iShares Preferred and Income Securities ETF (PFF) has a R-squared of 9.39 with a Standard Deviation of 7.87 and a Beta of 0.81. Its Mean Return is 0.52 while PFF’s Sharpe Ratio is 0.72. Furthermore, the fund has a Treynor Ratio of 6.79 and a Alpha of 3.45.

The iShares Russell Mid-Cap Value ETF (IWS) has a Beta of 1.1 with a R-squared of 87.04 and a Alpha of -4.11. Its Treynor Ratio is 10.3 while IWS’s Standard Deviation is 16.03. Furthermore, the fund has a Sharpe Ratio of 0.75 and a Mean Return of 1.06.

PFF’s Mean Return is 0.54 points lower than that of IWS and its R-squared is 77.65 points lower. With a Standard Deviation of 7.87, PFF is slightly less volatile than IWS. The Alpha and Beta of PFF are 7.56 points higher and 0.29 points lower than IWS’s Alpha and Beta.

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Performance

Annual Returns

PFF vs. IWS - Annual Returns

Year PFF IWS
2020 7.94% 4.76%
2019 15.62% 26.78%
2018 -4.77% -12.36%
2017 8.33% 13.1%
2016 1.26% 19.69%
2015 4.62% -4.93%
2014 13.45% 14.49%
2013 -0.59% 33.11%
2012 18.25% 18.27%
2011 -2.2% -1.55%
2010 13.96% 24.46%

PFF had its best year in 2012 with an annual return of 18.25%. PFF’s worst year over the past decade yielded -4.77% and occurred in 2018. In most years the iShares Preferred and Income Securities ETF provided moderate returns such as in 2015, 2020, and 2017 where annual returns amounted to 4.62%, 7.94%, and 8.33% respectively.

The year 2013 was the strongest year for IWS, returning 33.11% on an annual basis. The poorest year for IWS in the last ten years was 2018, with a yield of -12.36%. Most years the iShares Russell Mid-Cap Value ETF has given investors modest returns, such as in 2017, 2014, and 2012, when gains were 13.1%, 14.49%, and 18.27% respectively.

Portfolio Growth

PFF vs. IWS - Portfolio Growth

Fund Initial Balance Final Balance CAGR
PFF $10,000 $20,272 6.90%
IWS $10,000 $33,083 12.35%

A $10,000 investment in PFF would have resulted in a final balance of $20,272. This is a profit of $10,272 over 11 years and amounts to a compound annual growth rate (CAGR) of 6.90%.

With a $10,000 investment in IWS, the end total would have been $33,083. This equates to a $23,083 profit over 11 years and a compound annual growth rate (CAGR) of 12.35%.

PFF’s CAGR is 5.45 percentage points lower than that of IWS and as a result, would have yielded $12,811 less on a $10,000 investment. Thus, PFF performed worse than IWS by 5.45% annually.


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